What Election Uncertainty? Retailers Expect Best Holiday Season In Five Years

No matter who wins the presidential election tonight, retailers are as confident for the upcoming holiday season as they’ve been since before the financial crisis five years ago.

BDO USA’s latest survey of 100 chief marketing officers from a range of high-revenue brick-and-mortar and online retailers projects a 3.7 percent increase in comparable store sales for 2012—still well below the 5 percent of 2007, but stronger than any year since. That is good news for retailers hammered by Hurricane Sandy and comes as Wall Streetwaits anxiously for resolution to the U.S. presidential election.

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The CMOs who responded this fall couldn’t know how Sandy would descend on the Eastern seaboard, but they were braced for a fierce presidential election. That still didn’t faze them like the Eurozone crisis did in 2011, says Doug Hart, partner in the retail and consumer product practice at BDO USA, a national firm providing tax, financial advisory and consulting services. “The uncertainty of the elections doesn’t affect consumers like it does businesses,” Hart says. “The same is true for the fiscal cliff—consumers are still going to spend.”

Hurricane Sandy will likely dent sales in the short term, according to Hart, but retailers will have time to correct for that by the end of the season. Similarly while total holiday sales are expected to improve this year, last year’s number slightly beat expectations because the Euro crisis’ angst subsided a bit by December.

Major events like a storm or financial crunch can hurt retailers by driving up gas prices and shaking consumer confidence. While the stock market’s health has some correlation to retail spending, Hart says, those headwind factors are more important to CMOs—and haven’t been as destabilized as the market by this election cycle.

What will sell the most this holiday season? The CMOs overwhelmingly picked consumer electronics as the winning category on the strength of discounts and themed promotions. That could be a safe bet given the slew of new announcements and slashed prices within an increasingly crowded smartphone and tablet field.

All those products mean a brewing tablet war and a showdown between Android and iOS for your device. But even among existing products, companies like Amazon and Barnes and Noble are also looking to keep their respective Kindle and Nook products fresh through slashed prices.

Retailers will leave those companies to their battle for market share and aim to sell as many of the rival products as they can. The contest should help retailers meet their CMOs’ forecast of a 4.7 percent overall increase in sales this holiday season with improved variety of goods on the shelves.

The retail picture for November and December is much more positive than when BDO USA surveyed its pool of CMOs last year. Then, the respondents expected only a 2.1 percent increase in comparable store sales, worse than the year before. And only 41 percent of CMOs in 2011 expected their holiday sales to bump up. This year, that number is up to 56 percent.

After consumer electronics, the next biggest area of growth may be gift cards. A majority of CMOs surveyed predict that $100 billion industry will continue to grow.

CMOs said their biggest concern for the season is unemployment, followed by energy and fuel costs. (Ironically, retailers will be a good source of temporary jobs this holiday season, and such staff should see higher wages this year, as Forbes’ Susan Adams reports.)

With hindsight, last week’s superstorm might have placed number one in CMOs’ fears. But Hart at BDO is confident Sandy won’t skew this years’ results. “On a net basis there may be a slight negative impact, but it’s going to drop off in the rounding,” Hart says. If he’s right, retailers cashing in on the tablet and smartphone have reason to expect a holiday gift of the best sales they’ve seen in years.